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Κυριακή, 16 Μαΐου, 2021
Αρχική English Edition The notion of the trade secret and its differentiation from Intellectual Property...

The notion of the trade secret and its differentiation from Intellectual Property rights

By Maria Douka,

Due to the competitive conditions of the contemporary market, continuous and evolutionary research is necessary for every company’s sustainability in order to differentiate itself from its competitors and consolidate its personal identity in the market. This is the main reason why businesses tend to spend large amounts of money to finance their R&D departments. In this context, arises the necessity of the creation of a legal framework, regulating the protection of the companies’ research results. In other words, it is the intangible assets themselves that need to be protected as well, and not only the embodiment of the research discoveries, which is protected by property law. One of the categories of the intangible assets that have been considered by law as worthy to be protected and regulated, is the Intellectual Property rights category. Although, the classification of trade secret and know-how protection as an I.P. right is not yet undoubtful, one cannot neglect the fact that trade secret protection, as an intangible asset is closely related to the whole sense of the I.P. rights’ regime, even if partially differentiated.

Any kind of confidential information can be perceived as a trade secret, under the condition that it is valuable for a company, because the company has spent time, money and personnel resources to gain this piece of information and because it uses this information to gain a competitive advantage in the respective market. At this point, one may wonder: what makes confidential information so valuable and worthy that requires special protection by law? What are the conditions that need to be fulfilled in order to consider such information as a trade secret? The law cannot protect all forms of information, since this would constitute an excessive and unjustifiable limitation to the freedom of information, as protected both by the European Charter of Fundamental Rights (art. 11) and the Greek Constitution (art. 5Α). More particularly, a trade secret can be considered any business or marketing method, computer program and database, information on clients and suppliers, recipe and ingredient. Examples of some well-known information which are treated and protected as trade secrets is the Coca Cola recipe and the Google algorithm.

In the context of harmonization of European law in the field of intellectual property protection, the European Parliament and Council adopted the Directive 2016/943, that was incorporated in Greece with the law No 4605/2019. This Directive sets three prerequisites for the definition of the term “trade secret”. Firstly, trade secret concerns only confidential information, in the sense that it is not easily accessible to the persons that are acquainted and deal with this kind of information. One may thus conclude that the specific quality of a trade secret that is protected by the law is its confidentiality, meaning that if a trade secret becomes publicly known, its holder cannot raise claims against other users. However, they can claim indemnification against the people who used it unlawfully or against morals, which have contributed to its spread and have made it publicly known. This specific characteristic of a trade secret –its secrecy– is the exact reason for its protection and is closely related to the fact that even after the discovery of a trade secret, its beneficiary does not have the right to prevent other researchers, or even their competitors from reaching to the same discovery and use it for their own benefit. This of course, happens under the strict condition that the new beneficiaries have acted independently and have not tried to extract information from the latter one. Otherwise, this would constitute an unlawful act of stealing the confidential information, that would infringe the trade secret protection. As it is not the originality or novelty that is protected in a trade secret, as happens in the case of other Intellectual Property rights, the principle of exclusivity is not applied in this case.

Additionally, this information should have commercial value and its holder should have made every appropriate effort and followed active steps, to maintain its secrecy and avoid any undesired and unlawful disclosure. This third prerequisite constitutes the most discussed one. It has been clarified that the measures, a company should take in order to protect the confidentiality of a trade secret, are both contractual and technological, indicatively NDCs, confidentiality agreements with employees and franchisees, non-solicitation clauses, usage of passwords to protect files, documents and computers, the use of “clean desk” policy.

After having clarified the definition of a trade secret and all its constituents, we may proceed to its differentiation from other intangible rights and more specifically, the IP rights. It should be mentioned here that the European point of view which claims that trade secrets and IP rights constitute two distinct fields of protection, is not accepted worldwide. According to the W.I.P.O., trade secrets actually belong to this category. Irrespectively of which view one stands for, there are some differences that cannot be overseen. The main difference, on which the theory accepted by European law is based, lies on the range of protection offered to each one of them. More particularly, in the case of trade secrets, it is not all usage that is prohibited, but only the unlawful use, meaning the one that is related to illegitimate means. For IP rights protection, the opposite is true. As a result, the trade secret’s protection is not absolute nor exclusive. The trade secret holder is not protected against people that have independently acquired knowledge of the same information or through the method of reverse engineering[1]. Consequently, it should be noted that the I.P. rights protection is wider than the trade secret protection, as far as it concerns the range of acts that constitute an infringement, since the law in the case of the latter one punishes only its unlawful acquirement, use or disclosure. However, on the other hand, one may conclude that the range of information that are protected as trade secrets is wider than in the case of I.P. rights, meaning that any confidential information can be protected as a trade secret even at the premature stage of its creation, when it is not patentable. Additionally, they do not have to fulfill any quality criterion other than the commercial value for their holder and secrecy. They do not have to be original, distinctive, new or to be a result of their holder’s intellectual effort. Furthermore, the trade secret protection does not have any registration costs, since there is not a registration procedure nor a registry in a national or a European level.

Another distinction between trade secret and I.P. rights constitutes the fact that the latter ones’ protection is timely limited, defined explicitly by law. On the contrary, a trade secret’s protection can be continued eternally under the condition that the commercially valuable information is kept secret and confidential by its holder.

Finally, in the case of the trade secret case, there is no geographical limitation for its protection. The secrecy of this valuable information is preserved worldwide. However, the rules of protection vary from country to country, since there is not a fully harmonized international system of protection, and each country is free to autonomously set a level of protection on a national basis, under the reservation of the principle of superiority of the European law.

At this point, it should be mentioned that in cases where the secret information is patentable, it can be protected as both an I.P. right as a patent and as a trade secret as confidential. The decision in this case about the form of protection that better serves the holder’s interests, should be taken after meticulously considering the particularities of each case. Apart from the different characteristics of each right that are analyzed above, the two most important elements that need to be examined for this decision are the following. On the one hand, if the patent is subject to reverse engineering or if the information is independently obtained. In this case, the holder needs absolute protection, in order to prevent any potential lawful and parallel use of their right. On the other hand, one shall consider the cost of the protection. As mentioned above, a trade secret is informally protected and it does not require registration, legal or other fees, whereas a patent should be registered in order to be protected and thus, a costlier procedure is necessarily followed. This last notice should always be taken into consideration along with the benefits the holder expects to gain from the use and exploitation of their patentable information.

To sum up, after considering all of the above, one may conclude that the trade secret is a sui generis right on intangible information that is valuable for the person or company that owns it. Due to the globalization of the market and especially inside the internal market, the European Union took the initiative to harmonize the regime of this intangible asset’s protection to facilitate companies – trade secret holders who are active to more than one member state. This harmonization was realized with the passage of the European Directive and the way it was embodied by the domestic law of member states.

[1] The act of copying the product of another company by looking carefully at how it is made. (Cambridge dictionary).


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Maria Douka
Born in Athens, she graduated Athens Law School and currently works as a legal associate in the legal department of a banking company, where she handles issues and cases of corporate and banking law and offers legal consultancy services. She has obtained an LL.M. from the University of Bordeaux on public law and an MSc from Alba – The American College of Greece in Business for Lawyers. She is particularly interested in classic literature, theater and traveling.